The Lazy Fund Beats the Mixed Average: Core Accumulation Fund’s 9.5% Outruns Mixed-Asset Funds’ 8.5% — A Double Indictment of Active Allocation and Its Fees

A fund category whose entire reason for existing is to allocate for you professionally returned 8.5% over the past year. The “do-nothing” default option the system picks for you returned 9.5%. Both figures are net of fees. When professional allocation loses to autopilot — and charges more for it — the problem is not the 1 percentage point. It is the fee structure behind it.

The Core Proposition

Mixed-asset funds exist for one reason: someone professionally adjusts your equity-bond mix — adding equities in bull markets, rotating into bonds for shelter, steering through cycles. Provisional data released by the Mandatory Provident Fund Schemes Authority on 6 October 2026 (covering the 12 months to 30 September) tells an awkward story:

• Mixed-asset funds, average return: +8.5%
• Default Investment Strategy (DIS) Core Accumulation Fund (CAF): +9.5%

Same 12 months, same markets, 1.0 percentage point apart. And the Core Accumulation Fund is a semi-automatic 60/40 reference portfolio — roughly 60% higher-risk assets, 40% world government bonds — with a statutory fee cap of 0.85% and an actual average charge of only about 0.77%. On one side, managers actively allocating at market-average fees. On the other, a statutory formula executed at a capped fee. The active side lost — and costs more.

The long-term contrast is sharper still. The same MPFA release reports annualised net returns since inception of 4.7% for mixed-asset funds (since the system launched in December 2000), versus 7.1% for the Core Accumulation Fund since its April 2017 launch (against annualised inflation of 1.8%). One honest caveat: those annualised figures are not like-for-like — the former spans the dot-com bust and the 2008 crisis, the latter only the post-2017 bull market. But the past-12-month head-to-head is a fair fight, and its verdict is clear enough: the category’s professional allocation edge produces no evidence of beating the statutory default.

X-Ray the Data

Three layers to penetrate:

Layer 1: allocation produced no alpha. Mixed-asset funds charge precisely for allocation judgement. A statutory 60/40 reference portfolio outran the entire active-allocation category average over the past year. Individual funds within the category vary (MPF Ratings data: mixed-asset funds ranged 7.9%–9.5% in the first nine months), but the category average losing to the default proves the average professional allocator has no systematic edge. Members pay for active adjustment and receive no dependable excess return for it.

Layer 2: the fee cut never passed through. Market-average FER sits near 1.35%; DIS funds charge about 0.77% in practice — a gap of roughly 0.58 percentage points. Since the eMPF platform compressed the admin layer to 0.29%, investment management fees are the bulk of the FER — and that is the layer mixed-asset funds charge most and cut slowest. The 0.85% DIS cap proves low-fee mixed allocation is achievable; mixed-asset funds outside the cap charge at or above the market average. They underperform — and charge more.

Layer 3: scale multiplies the damage. Mixed-asset funds hold about one-third of system assets — roughly HK$573 billion of the roughly HK$1.684 trillion system. A 1 percentage point category gap is about HK$5.7 billion a year at system level, or about HK$3,390 a year per member on an average balance of HK$338,950. “Losing 1pp on average” sounds trivial; multiplied across a third of the MPF system, it is the annual budget of a small nation.

The Compound Toll

Translating percentages into human consequences. These are illustrative simulations (HK$5,000 monthly contributions), not promises:

A. The return gap (9.5% vs 8.5% — the past-12-month CAF vs mixed-average gap):

A 1pp gap over 30 years equals ~HK$1.92 million — about 5.7 times the average balance of HK$338,950, or 20 years of retirement spending at HK$8,000 a month. That is the upper-bound opportunity cost of “picking an average actively-mixed fund” versus letting the system pick for you.

B. The fee gap (market average ~1.35% vs DIS actual ~0.77%, tested at 7% gross return):

Losing 1pp on returns while charging 0.58pp more on fees — that is the double indictment: the allocation earned no alpha, and the price stayed at the active rate.

The Breakthrough Playbook

Track 1’s rule: every exposé ships with an offensive and defensive blueprint. The mixed-asset category average lost to the default. Members have four moves:

1. Stop pretending to be a fund manager. Logging in monthly to tweak your equity-bond mix is simply replicating a more expensive, less disciplined mixed-asset fund. The MPFA’s own words bear repeating: MPF is a long-term investment spanning over 40 years, “not to be viewed as a short-term investment, and members should not attempt to time the market.” GUM’s September data showed equity and mixed-asset indices both falling 1.7% in a single month — professional managers could not dodge that synchronised fall either. What makes you think you can?

2. Use Employee Choice Arrangement (ECA) to move to a low-fee scheme. The employee portion of mandatory contributions can be transferred once per calendar year (quota resets 1 January). Same money, same 60/40 allocation — the 0.58pp fee gap is worth about HK$665,000 over 30 years. Execution constraints: transfers are submitted via eMPF, priced at T+1/T+2 forward NAV with one-to-two weeks out of market, so avoid volatile windows such as the 27–28 October FOMC meeting.

3. The TVC backdoor into the Core Accumulation Fund. A Tax-Deductible Voluntary Contribution (TVC) account can be invested directly in the Core Accumulation Fund — unconstrained by the statutory DIS de-risking from age 50. That is a low-fee (~0.77%), 60/40, discipline-rebalanced mixed allocation, at institutional grade. If you are already making voluntary contributions, this is the shortest path from market-average fees to capped fees.

4. Demand fee accountability. The 0.85% DIS cap proves low-fee mixed allocation is feasible, and the MPFA is reviewing the cap with “room for further reduction” (target: next year). Mixed-asset funds charge a 1.35% average yet trail the statutory default. Members should ask their trustees one question: what allocation value does this 0.5 percentage point premium buy? If the answer does not convince, vote with your feet — ECA gives you one free move every year.

The sales pitch of mixed-asset funds is “professional allocation through the cycle.” The past year’s report card: the statutory lazy fund 9.5%, professional allocation on average 8.5%. Charged above the cap, delivered below the floor. This category does not need more allocation storytelling. It needs a double audit — of its fees, and of its evidence.